Onyx will pay $276 million upfront for the privately held South San Francisco company, and in the process it gains Proteolix's cancer drug candidate carfilzomib, which is being tested as a treatment for multiple myeloma, non-Hodgkin lymphoma, and solid tumors. Its drugs are designed to trigger cancer cell death with minimal damage to the rest of the patient's body.

Onyx, of South San Francisco, will pay another $40 million next year if carfilzomib reaches a development milestone, and will pay an additional $535 million if carfilzomib is approved in the U.S. and Europe. That includes a $170 million payment if the Food and Drug Administration decides to conduct a fast review of the drug.

The deal is expected to close in the fourth quarter. Onyx, which makes the liver and kidney cancer drug Nexavar, said the purchase will help it expand into blood cancers. It estimated the market for those diseases is worth $16 billion.

Proteolix is conducting midstage clinical trials of carfilzomib as a standalone treatment for multiple myeloma, which is a cancer of the blood. It expects data from that study in late 2010, and the companies may file for Food and Drug Administration marketing approval by the end of that year.

Next year, the companies expect to begin a late-stage trial of carfilzomib, Revlimid and the corticosteroid dexamethasone as a treatment for multiple myeloma, Onyx said. The trial will involve patients whose cancer has not responded to other therapies, or has returned after previous treatments.

Proteolix is also conducting midstage trials of carfilzomib as a treatment for solid tumors. The company is also testing an orally-dosed cancer drug, and is doing research on immunoselective compounds.